National Association of Home Builders Discusses Economics and Housing Policy

Improving Markets Soften Slightly

The NAHB/First American Improving Markets Index fell by 15 to 258 metropolitan areas in May. The decline was due to 19 areas falling off the index while four were added. The primary cause for leaving the list was softness in house prices. The 15 metropolitan areas that were dropped from the list because of a fall in house prices had an average price increase in April (the last month on the list) of 1.6 percent while the markets that remained on the list had average house prices increases of 6.7 percent.

The 258 metropolitan areas on the list represent over 70 percent of all metros and every state has at least one market on the list. An improving market is one where there has been a six month or more improvement in house prices, single-family building permits and employment. These three critical indicators of a local market health have proven to be good indicators of the overall health of a housing market.

The slight decline is in line with a similar decline in the index last year as winter house prices begin their seasonal weakness. The May to June 2012 index dropped 20 percent but the current weakness was less than 6 percent as house prices have gained more stability and momentum since 2012.

Texas and California lead the list with 21 metro markets on the list each. Florida is third with 17 markets followed by Michigan at 11 and Indiana at 10.